Labour under pressure over plans for UK economy

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Good evening.

Sir Keir Starmer’s Labour party, if polls are to be believed, is set to form the next UK government. But faced with what is likely to be an economy in pitifully poor shape, do its proposals — and specifically its green prosperity plan — still stack up, and how do they compare with programmes from the US and Europe?

As FT reporters detailed in this week’s series The Starmer Project, Labour’s plans are (surprisingly) bold, with an interventionist industrial policy strikingly different to the current Conservative government’s.

Would-be chancellor Rachel Reeves, who was in Washington for talks this week, makes no bones about embracing “Bidenomics” as a blueprint. Her party’s version of the US president’s $369mn green industry plan (somewhat misleadingly titled the Inflation Reduction Act) involves borrowing £28bn a year until 2030 to spend on transition policies such as subsidising wind farms, insulating homes and accelerating Britain’s nuclear programme.

The EU has also announced a green incentives programme to try to prevent European companies fleeing across the Atlantic to take up the offer of US subsidies.

But given that government borrowing costs have risen sharply since Labour’s plan was announced in 2021, critics argue it is now less affordable for the UK and could draw funds away from other priorities such as health. The FT editorial board asks whether a programme that is bigger, in relative terms, than America’s can still be affordable.

Reeves today acknowledged the scale of the challenge, saying the plan would now only start to take shape in the second half of Labour’s first term.

The party also faces resistance from some of its supporters in the union movement who have attacked the plans to end new North Sea oil and gas licences. And some within the party suggest it would be better to take a leaf out of Joe Biden’s book and ditch the “green prosperity plan” title for a new focus on job opportunities rather than climate change.

However the plans end up, Labour seems determined to take a more activist approach.

Early in the energy crisis for example, it made a point of calling for a windfall tax on energy companies. This, in a diluted format, was eventually adopted by the government, and, as we reveal today, is being further softened by ministers after lobbying by industry, arguing the levy is deterring investment.

One thing that does look nailed on is the dismal economic landscape a new government would inherit, with low growth, trading relationships strained by Brexit and weak public finances.

And as economics editor Chris Giles reports, the picture could get even bleaker if the Conservatives plump for more tax cuts despite the evidence that they are not affordable.

Need to know: UK and Europe economy

An “Atlantic Declaration” agreed by Biden and UK prime minister Rishi Sunak aims to strengthen economic ties as the allies turn away from globalisation and China’s role in supply chains. It hopes to increase US-UK trade in defence, nuclear materials and the critical minerals used in electric-car batteries.

The eurozone is in technical recession after its economy shrank in both of the past two quarters by 0.1 per cent according to revised data. Analysts say the move could make the European Central Bank more hesitant about continuing with its rate-rise programme.

President Recep Tayyip Erdoğan appointed former Goldman banker Hafize Gaye Erkan as Turkey’s central bank chief, underlining the shift from the unorthodox policies that have sent the country’s currency to record lows.

Need to know: Global economy

Could Tokyo become the “second city of the western world”? Asia business editor Leo Lewis examines its chances of becoming a global financial hub.

Brazil is divided over a proposal to drill for oil in the sea off the mouth of the Amazon. National oil and gas company Petrobras has lodged an appeal after the environmental agency rejected its request to drill an exploratory well.

Columnist Tim Harford says little stories can teach us that sometimes an economy can be dragged down by a simple mistake in monetary policy, while sometimes a recession occurs because the economy has hit an implacable obstacle. In this case, what an amusement park can teach us about central banks.

Need to know: business

The lucrative cable news era seems to be drawing to a close, judging by the crisis at CNN and the departure of Chris Licht, its embattled chief executive, after a 13-month stint featuring controversies, staff revolt and chaos. There are also more media upheavals in the UK, where two decades of the Barclay family’s ownership of The Telegraph has come to an end.

Thought you’d heard about all the ways that the pandemic had disrupted business? Signet, one of the world’s biggest jewellery companies, said the Covid-induced lull in dating had hit demand for engagement rings.

The 2021 claim from a former Whole Foods chief that the shift from meat to plant-based alternatives was a “megatrend akin to digitisation” now seems to ring hollow. It has been a painful two-and-a-half-year journey for investors in the sector since then.

Investor appetite for environmental and social activism also appears to be waning, judging by this year’s annual meetings of US companies, reflecting increasing political tensions and opposition from politicians such as Florida governor and presidential contender Ron DeSantis.

Can the return of Bob Iger revive Disney, faced with a legacy business in decline, streaming services losing money and a slumping share price? Watch the latest FT film.

Science round up

The world’s remaining “carbon budget” — the amount of CO₂ that can be emitted to have a 50 per cent chance of limiting global warming to 1.5C, has halved in the past three years, according to new calculations. That budget would be exhausted in less than six years at current emissions levels. Here’s our new jargon buster: the A-Z of climate change.

The UK’s data regulator warned that the rapid advance of technology that gathers and applies information directly from the human brain carries a serious risk of bias and discrimination at work and threatens privacy. It called for new regulations over neurotechnology applications in non-medical fields, such as wellbeing and marketing and in workplaces, to prevent ethical breaches.

Mindful of the potential damage to military, civilian and commercial communications from a satellite blackout, so-called white hat — or ethical — hackers are being invited to probe for flaws in a US government Moonlighter launched into space last Sunday.

Indian authorities dropped the periodic table and the theory of evolution from school textbooks as part of a campaign by the Hindu nationalist government. Science teachers warned the move could endanger the information technology sector, a big economic contributor to the country.

Whither the Hitler beetle and the Taylor Swift millipede? Science commentator Anjana Ahuja discusses the politics of naming species and whether those bearing offensive names should be given new ones.

Something for the weekend

Try your hand at the range of FT Weekend and daily cryptic crosswords.

Some good news

As the Mercury rises in the northern hemisphere, many readers’ thoughts may be turning to barbecues. The bad news is that a typical outdoor cooking set for four people releases more greenhouse gases into the atmosphere than a 170-mile car journey. The good news is that there are five simple ways to make your BBQ more environmentally friendly.